Study: State needs to expand tax credits

Report finds value in incentives but says more is needed

A UCLA/Headway Project study advocates the expansion of California’s 4-year-old Film and Television Tax Credit Program to maintain the state’s position as a production center and avoid seeing shooting move elsewhere.

“The uncertainty created by the limited size of California’s tax credit program, which is able to provide credits by lottery to only one in every five applicants, causes many film and TV producers to pursue credits from other states,” the study authors said.

Showbiz producers and unions have been strong supporters of the program, which has doled out $400 million in tax credits to date. The program was extended for a single year in October when Gov. Jerry Brown signed Assembly Bill 1069 on the final day for the governor to approve or veto bills from last year’s legislative session.

Variety reported on Jan. 26 that Assemblyman Felipe Fuentes had pledged to introduce legislation that would extend California’s film production incentive program — probably for five years — with the goal of telegraphing stability to the industry. The Golden State’s program is significantly smaller and not as sweet as many others, with a maximum 25% credit with any production over $75 million excluded.

The economic research on the study, titled “There’s No Place Like Home,” was conducted by UCLA’s Institute for Research on Labor and Employment as part of The Headway Project.

Study found that the tax credit program is benefiting the state economically with an impact of $1.04 for every dollar spent. A report issued last summer by the Los Angeles County Economic Development Corp. and financed by the Motion Picture Assn. of America estimated that figure at $1.13 for for every $1 the state allocated, based on the assumption that any production seeking a tax credit would leave California if it didn’t receive one.

The UCLA researchers lowered the economic impact figure after extrapolating that 8.4% of the subsidy went to films and TV shows that would have shot in California anyhow.

The study also recommended that the California program be revised in the following ways:

¦ The annual allocation should be increased from $100 million to $200 million. “California’s program is uncompetitive with locations such as New York, Louisiana and Canada that offer $400 million to $500 million per year in subsidies, have no caps and offer much higher percentages,” the authors said.

¦ Films and TV shows with budgets in excess of $75 million should be allowed to participate with a 12% credit. “These are the largest and most beneficial projects, often spending $100 million to $200 million and employing thousands of workers per project,” the authors said. “Today, the majority of these ‘tentpole’ productions leave California for states that, like Louisiana, have no cap on their subsidies.”

¦ Credits should be transferrable within the entertainment industry. “This keeps the tax credits entirely within the intended industry and removes the incentive for filmmakers to go out of state in pursuit of a cash option that California doesn’t offer,” the report said.

¦ The California Film Commissioner should be given power to deny or withdraw a credit if the project portrays California as an unattractive location. “Such guidelines are not uncommon in other states,” the authors said.

¦ A new bipartisan study, encompassing both legislators who support and oppose the program, should be commissioned. The authors said such a study would take six months and cost $250,000 — a “pittance” compared to the current annual $100 million tax credit allocation.

“California cannot simply throw up its arms and allow an important industry to leave the state completely,” the study concluded, noting that 40 other states and many foreign countries offer incentives.